Born on April 24, 1941, in New York City, Richard Charles Albert Holbrooke was the elder of two sons of Jewish parents, Dan Holbrooke and Trudi Moos. Both his father, a doctor, and his mother, the daughter of a leather exporter in Germany, fled the Nazis during the 1930s. Holbrooke attended Scarsdale High School in Scarsdale, N.Y., and received a bachelor's degree from Brown University in 1962. Soon after graduation he joined the foreign service and was sent to Vietnam, where he served in a number of diplomatic posts before he was reassigned to the White House to work on President Lyndon Johnson's Vietnam staff in 1966. Two years later he was sent to Paris as a junior member of the American delegation to the peace talks on Vietnam. Holbrooke then returned to the United States to spend a year as a fellow at the Woodrow Wilson School at Princeton University, but in 1970 he traveled again after accepting an assignment as director of Peace Corps operations in Morocco. In 1972 he resigned from the foreign service to become managing editor of the magazine Foreign Policy Quarterly, a position he held until 1976. He served as a contributing editor of Newsweek magazine in the mid-1970s as well.

Holbrooke continued to move between the public and private sectors for the next two decades. He returned to government in 1977 when President Jimmy Carter appointed him assistant secretary of state for East Asian and Pacific affairs, making him the youngest person ever to hold an assistant secretary post. In 1981 he reentered the private sector to become vice-president of Public Strategies, a consulting firm based in Washington, D.C., and four years later he took over as managing director of the New York investment firm Lehman Brothers. Holbrooke remained at the firm until President Bill Clinton named him ambassador to Germany in 1993.

Holbrooke's most sensitive and high-profile diplomatic assignment—brokering a peace plan to end the ethnic civil war in Bosnia and Herzegovina—came after he was named assistant secretary of state for European and Canadian Affairs in 1994. After he was handed the Bosnia mission in 1995, Holbrooke became a strong advocate of combining diplomacy with North Atlantic Treaty Organization air strikes against Bosnian Serbs—an approach that proved successful in ending the fighting. In November 1995 he served as chief negotiator of the peace accord signed in Dayton, Ohio. Despite his efforts in developing an agreement that was acceptable to the seemingly intractable warring parties, however, Holbrooke's handling of the Bosnia negotiations subjected him to criticism. Detractors faulted Holbrooke for conceding too much to then–Serbian President Slobodan Milosevic, whom many considered a war criminal. Holbrooke's critics suggested that the Dayton accord achieved a fragile peace but fell short of its ultimate goal—creating a multiethnic, unified Bosnian state. In his book ‘To End a War' (1998), Holbrooke detailed both the successes and failures of the Bosnian peace process.

Holbrooke left Washington in 1996 to move to New York to become vice-chairman of the investment banking firm Credit Suisse First Boston, but he remained a member of Clinton's inner circle. He interviewed for the post of secretary of state in Clinton's second term before the president decided on Madeline Albright. Clinton continued to rely on Holbrooke, however, as a consultant on foreign policy issues and as a special presidential envoy, assigning him to long-standing disputes between Greece and Turkey over the future of Cyprus and between the Yugoslavian government and separatist ethnic Albanian leaders in Kosovo, the southern province of Serbia. In June 1998 Clinton appointed Holbrooke as the United States ambassador to the United Nations, a post that carried Cabinet rank and a seat on the National Security Council. While supporters welcomed the addition of Holbrooke's strong voice to the administration's top foreign policy advisers, opponents questioned how Holbrooke, with his tendency to seek the spotlight and his attempts to move policy in independent directions, would function as part of a foreign policy team.